(Adds strategist quotes and details throughout; updates prices)
* Canadian dollar weakens 0.7% against the greenback
* Touches its weakest level since May 6 at 1.2279
* Canada's annual inflation rate accelerates to 3.6% in May
* Canadian government bond yields rise across the curve
By Fergal Smith
TORONTO, June 16 (Reuters) - The Canadian dollar weakened by
the most in four months against its U.S. counterpart on
Wednesday as the Federal Reserve brought forward its projections
for the first post-pandemic interest rate hikes, closing the gap
between it and the Bank of Canada.
Fed policymakers at the median now see the first rate
increase coming in 2023 instead of 2024, while the central bank
opened the debate on when and how it may be appropriate to start
tapering its massive bond-buying program.
Canada's central bank has already begun to taper
quantitative easing and has signaled it could begin lifting its
key rate from a record low of 0.25% in the second half of next
year.
"The market was certain that the Bank of Canada would be the
first to hike rates by a considerable margin," said Adam Button,
chief currency analyst at ForexLive. "Now the Federal Reserve
has had a change of heart and could be hiking sooner than
believed."
The Canadian dollar was trading 0.7% lower at
1.2277 to the greenback, or 81.45 U.S. cents, its biggest
decline since February.
It touched its weakest level since May 6 at 1.2279. Earlier
this month, it notched a six-year high at 1.2007.
Canada's annual inflation rate accelerated to 3.6% in May
from 3.4% in April, driven by surging shelter and passenger
vehicles prices, Statistics Canada said. That was slightly ahead
of analyst expectations and the highest since May 2011.
Oil , one of Canada's major exports, notched its
highest level since October 2018 at $72.99 a barrel before
settling at $72.15, up three cents on the day.
Canadian government bond yields rose across the curve,
tracking the move in U.S. Treasuries. The 10-year
was up 4.9 basis points at 1.432%.
(Reporting by Fergal Smith; Editing by Andrea Ricci and
Alistair Bell)
Read More
